Another drop in interest rates last week pushed refinancing activity to its highest level in nearly eight months, the Mortgage Bankers Association reported today.

The MBA’s market composite index, a measure of total mortgage application volume, gained 3.8 percent last week on a seasonally adjusted basis from the week before, thanks to a 9.2 percent spike in the index that tracks refinancings.

Borrowers took advantage of the second straight week of falling interest rates, in which the average contract interest rate on 30-year fixed-rate mortgages dipped to 6.15 percent from 6.21 percent, the average 15-year fixed fell from 5.86 percent to 5.79 percent, and the average rate on one-year adjustable-rate mortgages (ARMs) dropped from 6.1 percent to 5.93 percent.

Points, or loan-processing fees expressed as a percent of the total loan amount, averaged 1.05 on the 30-year loans, 1.1 on the 15-year, and 0.93 on one-year ARMs — compared with 1.13, 1.06 and 0.92, respectively, in the previous week. These points include the origination fee and are based on loan-to-value ratios of 80 percent.

Consumers seem to be holding off on buying homes, as the index that tracks purchase-loan activity dropped for the second straight week, MBA reported. The index last week was down 0.7 percent on a seasonally adjusted basis from the previous week, following a 3.1 percent decline at mid-month.

MBA reported that the refinance share of loan applications rose to 49.6 percent last week from 47 percent at mid-month, and the ARM share inched up from 14.2 percent to 14.7 percent.

The Mortgage Bankers Association survey covers approximately 50 percent of all U.S. retail residential mortgage originations, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.

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